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How AML efforts are progressing globally - and how we can help

Wendy Gore

Compliance professionals know only too well how many measures have been put in place over the last few decades to curb money laundering around the globe. But, how effective have these efforts been to date?

Recently, Transparency International published a report that takes a look at how countries across the world have been faring with their implementation of the Financial Action Task Force’s (FATF) 40 anti-money-laundering (AML) recommendations. Since 1990, when FATF introduced these suggested regulations, more than 180 countries worldwide have signed up to enact them.

Yet, even after committing to implementing these AML regulations, and officially renewing this commitment regularly in cross-jurisdictional meetings, you might be surprised at just how little progress these countries have made in putting them into practice.

In fact, an April 2017 assessment of 30 countries' AML efforts found that their level of compliance with the FATF's 40 recommendations reached only a paltry 25%. Even though this marked an improvement from 2011 – when AML compliance rates were measured across 160 countries and the results showed an underwhelming, if not dismal, 12.3% level of full implementation – it still falls far short of what might seem an acceptable standard. And, considering that it has taken many of these nations 27 years to get even this far, it's probably safe to say that the state of AML compliance could use some improvement.

Good at drafting laws, less efficient at enforcing them

Digging deeper into the numbers in Transparency International’s study, it's clear that most of the countries assessed were quite proficient at enacting legislation designed to carry out the FATF's 40 AML prescriptions. Indeed, 87% of these 30 nations have crafted laws making money laundering a criminal offense. And, 83% have drawn up rules making it mandatory for financial firms to report suspicious behaviour. So far, so good – or so it would seem.

But, in spite of having these laws on their books, the vast majority of these jurisdictions have failed to take the next step of actually actively enforcing these regulations, a fact that becomes obvious once you learn that a staggering 86.7% of the 30 countries were found to be ineffectively or insufficiently using the AML powers they had given themselves.

These images from Transparency International show quite clearly the extreme disparity between the existence of AML laws versus the enforcement of these legal measures.

One of the worst areas of AML compliance, which this report underlined, involves the widespread use of shell companies in a whole host of transactions, in order to hide identities and facilitate everything from tax evasion to the laundering of illegally obtained or sanctioned funds. Inexpensive and simple to create, some shell companies have become the refuge for criminals, terrorists and those looking to manipulate financial systems around the world.

Even though documents such as the Panama Papers have exposed the prevalent and epidemic use of shell companies to conceal ill-gotten gains and hide from tax authorities, it seems countries are continuing to do very little to police or monitor these companies or those who hide behind them. As such, shell companies continue to thrive and transact business at will within, even within most borders which claim to have committed to enforcing FATF's AML recommendations.

Describing the extent and seriousness of this situation, Transparency International states that, "Anonymous shell companies are the weak link in the global financial system." The truth of this statement seems to be backed up by the fact that not even one of the 30 countries assessed since 2014 has managed to effectively stop or even curtail abuses relating to shell companies.

The following image from Transparency International paints a stark picture of the current sorry state of affairs when it comes to AML compliance in regards to shell companies.

How we can help

We offer some of the most extensive, rich, treated and structured ownership information available – powered by our database Orbis, which covers 220 million companies across all countries worldwide.

While it's virtually impossible to pierce the layers of complexity and anonymity which purposely surround shell companies, shielding their owners' identities from view, our ownership data gives you certain tools that can offer valuable hints about which entities may merit greater scrutiny.

For example, as you're probably well aware, shell companies that own multiple other companies and which display an extensive and complicated corporate group can often be more suspicious than those that simply stand alone or control a few modest holdings. After all, the type of concerted and costly effort required to block a large number of companies from the light of day and the attention of the authorities and auditors ought to raise a red flag that something worthy of concealment and possibly illegal might be taking place.

But, just exactly how do you go about finding out whether a company has an extensive or complex corporate group?

This is where we come in. Our ownership information and tools allow you, relatively quickly and easily, to discover how many subsidiaries and related companies exist within a company’s corporate group. This knowledge could be vital in helping you sort out the legitimate potential customers, suppliers and business partners from those that might be less above-board (and desirable) than they would otherwise seem.

With so many countries and jurisdictions lagging behind in their implementation of FATF's 40 AML recommendations, it’s now too often left up to individual companies, and their hardworking compliance teams, to protect themselves in their campaigns to stay compliant.

In this ongoing effort, access to the sort of ownership information and tools that we provide can sometimes make the crucial difference, adding a higher degree of confidence and certainty to your compliance-related business decisions.

How Bureau van Dijk can help you

Certainty is a highly-prized commodity in business. Data might be getting bigger all the time, but this only makes extracting value from it more difficult.

In capturing and treating private company information we aim to give you more certainty –
and help you make better decisions and work
more efficiently.

Our solutions are designed to help different business challenges and streamline your workflow. Many of our customers blend our information with their own internal data to get a more complete picture of the companies in their ecosystem.